A common-pool resource approach for water quality management: An Australian case study

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a v a i l a b l e a t w w w. s c i e n c e d i r e c t . c o m

w w w. e l s e v i e r. c o m / l o c a t e / e c o l e c o n

ANALYSIS

A common-pool resource approach for water quality management: An Australian case study Ashutosh Sarker a , Helen Ross a , Krishna K. Shrestha b,⁎ a

School of Natural and Rural Systems Management, The University of Queensland, QLD 4072, Australia Urban and Regional Planning and Policy, Faculty of Architecture, Design and Planning, The University of Sydney, NSW 2006, Australia

b

AR TIC LE I N FO

ABS TR ACT

Article history:

Water is perhaps one of the most studied types of common-pool resource (CPR) goods. Its

Received 19 December 2007

quality, however, has not been discussed as much in the CPR literature as its quantity. We

Received in revised form

examine the significance of studying water quality from a CPR perspective, and then

13 March 2008

analyze implications for the formulation of institutional arrangements to improve water

Accepted 1 May 2008

quality. We illustrate with a case study in South East Queensland, Australia. This involves a

Available online 7 June 2008

rural catchment (watershed) that contributes high sediment and some nutrient loads to the Brisbane River, where it affects urban water quality and visual amenity, water treatment

Keywords:

costs, and dredging costs at the port. The pollutants then threaten marine water quality and

Water quality

habitat values for threatened species in Moreton Bay, a marine protected area. We analyze

Common-pool resources

the potential for a CPR understanding to enhance the design and financing of a water quality

Ecosystem services

management regime. Rather than seeking to supplant conceptualizations of externalities as

Collaborative management

a basis for design of policy instruments, we propose arrangements that combine the CPR

Externality

and externality concepts to offer a powerful logic and financial basis for collective

Australia

management. Market-based instruments could facilitate downstream populations to help pay for catchment restoration in return for enjoyment of improved water quality resulting from strengthened ecosystem services, while associated non-market-based instruments could help all parties understand and expand their roles under a common-pool management regime. We argue that recognition of CPR attributes provides a logic for cooperation and co-investment between stakeholders who are in a position to affect, or are affected by, water quality in different parts of a large river system. © 2008 Elsevier B.V. All rights reserved.

1.

Introduction

Water, particularly in the sense of its availability for irrigation and other purposes, is one of the most extensively studied types of common-pool resource (CPR) goods1. Water allocation is managed locally through a CPR approach in many countries

(e.g., in Japan, Sarker and Itoh, 2001, 2003; in Nepal, Shivakoti and Ostrom, 2002; in Indonesia, Christie, 1992; Covarrubias, 1972). Unlike water quantity, water quality has been little studied in CPR terms. In this paper, we propose that water quality deserves greater recognition within the CPR literature, that the recognition of CPR characteristics of water quality can

⁎ Corresponding author. Tel.: +61 2 93513668; fax: +61 2 93513031. E-mail addresses: [email protected] (K.K. Shrestha), [email protected] (A. Sarker), [email protected] (H. Ross). 1 Here we follow the arguments of Blomquist et al. (2004), Ostrom et al. (1994), and Ostrom (1987) in differentiating between CPR ‘facility’ (such as groundwater or surface-water basin) and the flow of resource units or goods (such as water) from the facility. 0921-8009/$ – see front matter © 2008 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2008.05.001

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enhance the interdisciplinary literature on water management, and that this recognition can assist the improvement of management arrangements for diffuse-source pollution (DSP). There is a growing body of literature on the conceptual and management aspects of the CPRs (or ‘Commons’) such as water bodies, forests and lands (Ostrom, 1990, 2005; McKean, 1992, 2000; Tang, 1992; Bromley, 1992; McCay and Jentoft, 1996; Quiggin, 2001; Williamson et al., 2003, and Brunckhorst and Coop, 2003). It is frequently argued that a CPR has multiple users for whom joint use involves high subtractability and low excludability, posing a danger of over-exploitation and destruction of resources (Ostrom et al., 1994; Ostrom, 1990). Institutional arrangements that are devised and implemented through cooperation among users at a local level have been suggested to avoid or minimize the degradation of a CPR owing to overuse, and to improve equity of access and outcomes. CPR theories offer significant ideas to understand and address a variety of issues associated with the management and distribution of CPR units (for instance volumes of water) among different groups of users. However, very few studies (examples being Schlager et al., 1994; Blomquist et al., 2004) have investigated the issue of managing the quality of CPR units or goods (e.g., water quality). Meanwhile Australian and international approaches to integrated catchment management (or watershed management) have long been founded on the recognition that upstream actions affect downstream resource uses (Nelson, 2005; Ewing, 2003; Marshall et al., 1996; Mitchell and Hollick, 1993). Collaborative decision-making and collective on-ground actions such as Landcare and Waterwatch groups are thus favored strategies (see Carr, 2002). Although this way of thinking has not been linked specifically within the CPR literature to managing water and other natural resource problems, analysts are beginning to recognize the potential for catchments to be considered as CPRs (Kerr, 2007; Morton and Padgitt, 2005; Ravnborg and Guerrero, 1999). To our knowledge, they are yet to extend this thinking to the quality aspect of water within catchments. In western societies which often involve highly privatized property rights, water quality problems are typically treated as externality rather than CPR issues. Conventionally, regulations, monitoring and imposition of penalties have been considered the main instruments for addressing the externality issues, but these are not achieving the outcomes anticipated by many communities (McDonald et al., 2004; Natural Heritage Trust, 2004). Government regulations and market-based instruments (MBIs) have dealt with point source pollution (PSP), but have scored little success with DSP (Gordon, 2005). The MBI is a new approach for addressing DSP (Nguyen et al., 2005; Parikh et al., 2005; MacDonald et al., 2004; Natural Heritage Trust, 2004; Whitten et al., 2004; King and Kuch, 2003). The earlier, nonmarket-based instruments (NMBIs) including government regulation and education through agricultural extension have in many cases proved to be ineffective and costly (MacDonald et al., 2004; Whitten et al., 2004). No consistent mechanisms exist to manage water quality as an externality that DSP generates. Thus a systematic approach to analyze diffuse-source water quality issues is needed to support more effective management. We elaborate an argument that water quality deserves consideration in terms of its CPR characteristics, and discuss management consequences, using the example of the Lockyer

Catchment and its contributions of poor water quality to the Brisbane River and Moreton Bay in South East Queensland, Australia. We then investigate the potential for combining the CPR management idea — fostering cooperative approaches — with the issue of water quality as an externality issue, discussing the ideas of MBIs, NMBIs and enhancement of ecosystem services in dealing with water quality issues arising from rural DSP. In doing so we recognize that crafting CPR institutions within an Australian rural society that has little tradition of sharing natural resources collectively is likely to be more challenging than in societies that have strong traditions for recognizing and managing CPRs, though recent policy and landholder support for collaborative arrangements holds promise. Then, we outline the research method and describe the case study, followed by a discussion that explains management opportunities for collaborative management of water and water quality using a CPR approach. We conclude by arguing that it is not necessary to supplant current conceptualizations and policy instruments based on recognition of externalities: we propose arrangements that combine the CPR and externality concepts to provide a powerful logic and financial basis for collective management.

1.1.

Water quality as a CPR issue

A CPR is often defined as a large, natural resource system having two specific characteristics, irrespective of property rights, namely: excludability — the difficulty of excluding beneficiaries from appropriating a benefit (resource units) from the resource; and subtractability — once the benefit is appropriated by a beneficiary, it is no longer available to other beneficiaries (Ostrom, 2005, 1990; Ostrom et al., 1999). A water body such as a river, lake or groundwater aquifer is an example of a typical CPR. Although not impossible, it is very difficult to exclude a water user from withdrawing water. The water once withdrawn is not available to other users. Since one user's withdrawal of water affects the opportunities of other users, an externality problem (see below) becomes evident (Ostrom et al., 1994). Water quality — a highly valued attribute of the water — can be examined through a CPR approach. Although water quality is an attribute of water, which is a CPR unit or good, it possesses CPR characteristics. Firstly, it is difficult to exclude people from appropriating water quality by polluting a water body. (Point sources can be managed through regulation and polluter pays approaches, but diffuse sources of pollution are less amenable to such strategies — although regulation and institutional arrangements can induce some changes, for instance in agricultural practices). Secondly, water quality is subtractible, as once water quality is significantly reduced by one user, lower quality is available to other users. For instance, deterioration of water quality can occur if some landholders' farming activities lead to substantial combined levels of soil erosion or run-off of nutrients, reducing the water quality available for other users. It is also difficult or costly to prevent landholders from undertaking farming activities that deteriorate the water quality.2 2 We recognize that past actions in Australia may be more to blame than present ones, in that past removal of riparian (riverfront) vegetation affects the amount of sediment or nutrients reaching the rivers.

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A similar problem occurs in urban areas or with industrial pollution: water pollution arises, with similar issues of subtractability and excludability. We will confine our discussion however to diffuse rural examples and their management consequences. A typical CPR also has two major management problems: appropriation and provision (Ostrom et al., 1994). In the case of a water body, an appropriation problem relates to the allocation of water among its users. A provision problem is the users' contribution of maintenance services that help preserve the water system. Appropriation and provision problems also arise with regards to water quality within a CPR. An appropriation problem arises when landholders (or others) undertake activities in a way that degrades the water quality available. A provision problem arises if the landholders and beneficiaries do not contribute to maintaining the quality of water, for instance by improving their agricultural practices or by enhancing the supply of ecosystem services that improve water quality through natural filtering processes3. A potential solution to both appropriation and provision problems is cooperation from CPR users, with the assistance of the institutional arrangements they formulate to use the CPR sustainably (Ostrom, 1990). Different fields of study have used different terminology and somewhat different concepts for this cooperation: “collective action” and “nested platforms” in the CPR literature (e. g., Steins and Edwards, 1999) and “co-operative management” in the natural resource management literature (e.g., Ross and Innes, 2005; Borrini-Feyerabend et al., 2000). Initiating and fostering cooperation among those who are responsible for water quality degradation (and improvement) poses particular challenges because cooperation in water quality involves several stakeholders — among landholders but also between landholders and beneficiaries of improved water quality. Solving water quality problems also involves a heavy financial cost which landholders may either be unable or unwilling to bear, owing to the lack of significant benefit that they might receive through cooperation. For instance, if a landholder sets aside costly agricultural land for constructing riparian buffer strips, this assists the beneficiaries, but not necessarily the landholder — especially considering the loss of cultivated land area4.

actions can produce externalities affecting other ecosystem components. If the clearance of vegetation for farming, construction of roads or logging of forests causes erosion that pollutes nearby rivers with sediment, the downstream users and managers of water resources suffer the negative externality. When a landholder uses fertilizer to produce crops, excess fertilizer may deteriorate the water quality in the streams and rivers, affecting other users. Thus, landholders, road builders or loggers impose a part of their production costs (negative externalities) on the managers and users of the water resources. If, however, a landholder constructs a riparian buffer zone at his or her own cost to prevent or intercept sediment and nutrient flows, this action generates ecosystem services (positive externalities) to improve the water quality both locally and throughout the water body concerned (further downstream, in the case of a river system). Although the landholder produces positive externalities for the managers and other users of the water resources, he or she is not usually compensated for producing the extra benefits. Therefore, in both negative and positive externality cases, as economists such as Pindyck and Rubinfeld (2004) argue, resource allocation is inefficient and market failure is a consequence. One view would be that landholders, as the originators of a DSP that produces a damaging externality to others, should pay for the damage according to the “polluter pays” principle. However, this principle may not be effective with DSP in rural areas, given local differences in erodibility of soils, the historical factors involved in creation of the problem (including low expectations of duty of care to the environment) and the economics of farming and food marketing. A “beneficiaries pay” principle may be more effective given that the polluter may suffer diminished farming production in order to reduce the pollution, whilst the beneficiaries could reasonably be asked to compensate the landholders for receiving their benefits from the reduction in production. In other words, the beneficiaries, such as people downstream who need the landholders to enhance the ecosystem services that improve water quality, might be approached to help meet some of the costs.

1.3. 1.2.

Policy approaches for managing externalities

Water quality as an externality issue

Water quality is more frequently viewed as an externality issue. In a catchment, many ecosystem components are interrelated through the hydrological system. For instance, the nature of soils, slopes, and vegetation cover — including crops — affects the quantity, quality and seasonal availability of water. As people modify certain parts of ecosystems, for instance through urbanization or farming practices, their 3

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Ecosystem services (Binning et al., 2001; Daily, 1997) are natural environmental processes generating a range of goods and services that are useful for humans. The maintenance of water quality by using riparian vegetation strips to filter nutrients and sediments entering water bodies is one example. 4 In some types of operation there may be benefits to landholders from creating riparian buffer strips, or altering land management practices. These depend on the nature of the farming operation.

MBIs are currently favored to correct market failures arising from externalities. MBIs are defined as economic instruments that seek to change people's behavior as a means to correct market failure and consequent externalities (Natural Heritage Trust, 2004; Whitten et al., 2004). The application of MBIs such as in emission trading programs in the USA has shown some promising results in managing PSP (Stavins, 2001, 2003). However, it is not yet known how well MBIs could be applied to solving DSP problems (Ward et al., 2005). The alternative, Non-Market Based Instruments (NMBIs), are principally non-economic instruments, such as government regulations or persuasive strategies such as agricultural extension. Sources of diffuse pollution responsible for soil erosion and nutrient transport are more difficult to identify than point source discharges, and thus cannot be as easily controlled by government regulation and monitoring. Environmental managers thus look principally to education and

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Fig. 1 – Existing instruments for coping with DSP and water quality problems. Sources: Natural Heritage Trust (2004); Whitten et al. (2004); MacDonald et al. (2004).

persuasion, seeking to build landholders' understandings of the problems and ways to solve them, and to motivate them to do so. For instance in agricultural extension, efforts are made to identify solutions that fit together well with landholders' existing knowledge and aspirations, and preferably deliver benefits both for the landholder and external beneficiaries of their actions. Recent communication literature points out the benefits of social relationships in motivating behavior change — a useful point for linking NMBIs to a CPR management approach (e.g., McKenzie-Mohr and Smith, 1999). Fig. 1 shows the existing policy instruments that are available to deal with DSP and water quality issues. These are MBIs, including price-based, quantity-based and market friction; and NMBIs, including government regulations, moral persuasion and education. This classification, drawn from literature, does not yet include cooperative instruments relating to the CPR management idea. Note that the existing NMBIs are largely directed towards individuals, not collectives, although agricultural extension can be delivered through group processes. We underline the need for a further type of NMBI, an arrangement to advance cooperation among stakeholders towards water quality management. The case study below acknowledges the extent to which the institutional arrangements currently available provide foundation for this, and spells out the further types of cooperation needed to achieve action on-ground at the scale required.

identifying, linking and comparing issues of resource management (Howitt, 2001). We draw upon relevant literature, conceptual analysis and six years of participant observation research by the second author with land and water management bodies in the nested Lockyer, Brisbane River and Moreton Bay catchments5. The case study is the Lockyer catchment in South East Queensland (see Fig. 2). It is a rural area centered about 80 km west of the state capital, Brisbane. The main river, Lockyer Creek, drains eastward into the Brisbane River, and then into Moreton Bay. The catchment has an area of 2954 km2, an average annual rainfall of 700–1200 mm but with high temporal variability — so that rivers flow in pulses and can be dry or a series of disconnected pools for much of the year. It has a population of around 33,000. The catchment includes some of the richest farming land in Australia, with diversified land uses including high-value vegetable cropping, grazing and some timber and sandstone extraction. Farming enterprises range from large-scale and highly successful operations to small family farms, some economically marginal. The area is often referred to as “The Salad Bowl of Queensland.” The catchment was chosen as the case study as it is one of the most significant sources of sediments, and to a lesser extent nutrients, affecting the quality of water in the Brisbane River and Moreton Bay. (Other catchments contributing water 5

2.

Case study

This study employs an in-depth case study as a research strategy to illustrate how water quality can be considered as a CPR concern, and how this type of analysis can open improved management opportunities. The case study offers a method of learning about a complex issue through extensive description and contextual analysis (Yin, 2002). It is a valuable method for

In the Lockyer this includes observation enabled through collaborative research with the former Lockyer Catchment Association on ecosystem services, supervision of two PhD projects with landholders in the Lockyer, and participation in and assistance with a large range of community meetings including many of those leading to the formation of the Lockyer Water Users Forum, a coalition of irrigators relying mainly on groundwater. In the Brisbane River and Moreton Bay area, participation has focused on the activities and partners of the Healthy Waterways Partnership, where the second author is a member of the Scientific Experts Panel.

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Fig. 2 – The Lockyer, Brisbane River and Moreton Bay Catchments, (Australia in the inset).

to the main river and bay suffer higher nutrient levels, from both non-point and point sources). The problem in the Lockyer is exacerbated by highly erodible soils, the contributions of past and present agricultural practices, and the low retention of riparian vegetation. In the past, land clearing and agricultural practices led to substantial erosion of the fragile soils, and the land remains highly vulnerable6. Grazing steep slopes 6 Unfortunately, landholders were required by past governments to clear land in order to earn and retain holdings, including cutting down the riparian vegetation that we now know would protect river banks and water quality (D. Beitz, pers. comm).

and retaining insufficient pasture cover have contributed to gully erosion. In severe storms, sheet erosion can strip the ploughed soils along the alluvial flats, and lack of riparian vegetation to bind river banks can cause chunks of bank to subside into the stream. Removal of snags from streambeds and straightening of channels in some areas has increased flow rates during intense rainfall, leading to increased erosion immediately downstream. Water quality research reveals that 70 % of the fine sediments in Moreton Bay originate from 30 % of its catchment, particularly the Lockyer catchment because of its highly erodible “Marburg formation” soils (Abal et al., 2005). Sediment

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loads from the catchment are estimated at 21,275 tons per annum. Erosion intensifies in major rain events: a total of 1.2 million tons of sediment is estimated to have reached Moreton Bay in a 1996 flood. In addition, run-off of nutrients (nitrogen and phosphorus) from fertilizers, stock dung and natural causes is a significant problem throughout South East Queensland's rural lands, and contributes over 60% of the region's total nitrogen loads (with the balance coming from point sources and diffuse urban sources). In low river flow years, when there is less water to dilute pollutants, an average of 2650 tons of nitrogen and 375 tons of phosphorus per year are deposited in Moreton Bay7. Thus various land management actions by Lockyer landholders, past and present, externalize parts of farm production costs to those downstream, including other farmers, the city of Brisbane, and its water supply organization SEQ Water. Water quality downstream is affected at several scales. Heavier sediments travel short distances initially and clog local stream beds, interfering with the infiltration process of surface to ground water. This “slug” of sediment moves slowly downstream in subsequent rain events. Lighter sediments travel great distances throughout the system. While Brisbane's water supply is nominally taken from Wivenhoe Dam, north of the Lockyer Valley, it travels down the Brisbane River to the treatment plant8. After heavy storms, this water is contaminated by water joining the Brisbane River from Lockyer Creek and other tributaries, necessitating additional treatment and periodic cessation of water treatment. The brown, turbid water in the river then progresses through the city of Brisbane, which prides itself on a “River City” identity although citizens would not attempt swimming. Sediment deposition necessitates significant dredging at the port and further downstream. In Moreton Bay, a marine protected area, sediments cause further turbidity and damage sea grass habitat used by dugong and other species, while nutrients contribute to algal blooms. Because most of the Bay is fringed by two large islands, flushing is limited especially in the southern part of the Bay. Moreton Bay supports hundreds of dugong and dolphins, thousands of turtles and migratory wading birds, and over 160 species of corals (Fellegara and Hough-Guldberg, 2003). Our case study area of interest connects stakeholders who are widely separated geographically, since the water quality problem commencing in the Lockyer catchment extends to water recipients up to 150 km downstream — the approximate distance from the head of the catchment to the shoreline of Moreton Bay. The CPR issue thus requires solutions to be agreed between landholders in the catchment; the Department of Natural Resources and Water which administers the streams and banks; the Environment Protection Agency for its roles in water quality management and Moreton Bay Marine Park; interested downstream parties such as the Brisbane City Council, Brisbane's water supply authorities, and newly

7 Figures supplied by Moreton Bay Waterways and Catchments Partnership, July 2005. 8 The water supply authority has ascertained that the river below the dam provides an ecosystem service, delivering cleaner water than if the water were to be piped from the dam (M. O'Donohue, pers. Comm, 2003).

created catchment management bodies (multilateral partnerships between a number of community, government and industry bodies (Head, 2005; Whelan and Oliver, 2005). The physical distance and differing roles of stakeholders with respect to water quality can make the typical, smaller scale common property or CPR management institutional arrangements more difficult. Nevertheless some of these bodies are already collaborating (see below) and others are potential “buyers” in an MBI approach. The institutional arrangements among the potentially interested parties are complex. Within government, responsibility for water quality matters is shared between two bodies: the Environmental Protection Agency and the Department of Natural Resources and Water. The Environmental Protection Agency has a water quality initiative focusing on the achievement of State-wide water quality objectives, and also a general management responsibility for the marine national park and its species. The Department of Natural Resources and Water has responsibility for management of the river channel including bed and banks — a small area since most farm boundaries go right to the top of the bank, as well as the allocation of irrigation waters. It is also lead agency for the development of water resources plans — the first stage of water planning in the Moreton region, which includes the Lockyer, was completed in mid 20079. Two non-government organizations are highly relevant to the water quality management. Australia has created a set of collaborative management bodies, referred to as “Regional Natural Resource Management (NRM) bodies” under the “Natural Heritage Trust 2” and the “National Action Plan for Salinity and Water Quality” programs (Robins and Dovers, 2007). The NRM bodies are funded directly by the federal government with “investment” inputs from a potentially large number of other parties. In most cases the NRM bodies seamlessly fulfill functions under both programs. These bodies are characterized as “community-based,” in the sense of “non-government” rather than necessarily local. While not neatly stakeholder-based, they typically include local government, conservation groups, and industries. Many incorporate predecessor organizations — integrated catchment management bodies (Mitchell and Hollick, 1993) and Landcare groups (Carr, 2002). These NRM bodies are required to formulate regional plans that must be approved by a CommonwealthState government committee before funds are released. They must then implement these plans using partnerships and an investment model to combine the efforts of their constituents. For instance, to achieve part of its plan, a regional body could coordinate local government bodies who would contribute staff, time and machinery; and Landcare groups who would contribute their knowledge and voluntary labor, and resource these parties to do so. The NRM regional body for South East Queensland is called SEQ Catchments. The other organization, specializing in both urban and rural water quality issues, is a voluntarily formed partnership 9

The Water Resource (Moreton) Plan 2007 defines availability of water in the plan area; provides a framework for managing water sustainably, its extraction and water allocations; and where practicable, aims to reverse degradation that has occurred in natural ecosystems.

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of 117 organizations, called Moreton Bay Waterways and Catchments Partnership, also known as “Healthy Waterways Partnership.” The Healthy Waterways Partnership was established in July 2001 as a unique collaboration between government, industry, researchers and the community (Meecham and Claridge, 2006). The Partnership is funded entirely by its own membership, particularly the larger local governments, including Brisbane City Council, and includes state government agencies, local governments and community bodies. It monitors and reports on water quality on behalf of its partners, models the risks of future decline in water quality, and coordinates the writing and implementation of Healthy Waterways strategies. Addressing rural diffuse pollution loads is a new priority for the Partnership. The Partnership and SEQ Catchments work together, with the Partnership focusing on knowledge-building and strategy, and SEQ Catchments focusing on implementation, though they have some shared projects including one in the Lockyer catchment. These two collaborative organizations, working together, offer an organizational capacity to implement (or negotiate the implementation of) the arrangements we suggest here. Institutional arrangements for cooperation among landholders in the Lockyer (or elsewhere) are less well developed, though there is a recently formed Lockyer Water Users Forum (Sarker et al., in press) concentrating on groundwater management, and farmers belong to a variety of separate fruit and vegetable growing organizations. SEQ Catchments employs staff to liaise with catchment landholders. Cooperation among the Lockyer landholders, and between the group of landholders and the beneficiaries of improved water quality, would be needed to promote change in agricultural practices (presumably mainly at landholders' expense) and remediate the riparian vegetation providing ecosystem services to an extent capable of improving water quality. This local cooperation is required to achieve agreement among neighbouring landholders to set aside sufficient productive farming land on adjoining properties on both sides of the river to have an appreciable effect on water quality. They then need to negotiate an equitable and efficient system (among themselves) for receiving and distributing a payment for ecosystem services, to finance planting or improvement of riparian vegetation on that land. In addition, cooperation is also required between landholders and the downstream beneficiaries of improved water quality to establish a financing arrangement, and set out mutual expectations and performance requirements for the remediation activities. Suitable cooperative institutions are partially in place for the entire region (through SEQ Catchments and the Healthy Waterways Partnership, alongside state government roles). However, so far there are no local collective groups capable of organizing cooperation among landholders. This task is made more difficult as the landholders are mainly politically conservative, and there is negligible communication between commercial farmers and those landholders who own properties for lifestyle reasons. While some landholders belong to cooperative groups, such as grower groups, Landcare groups, and recently, irrigation water users groups, their current levels of communication and cooperation are insufficient to expect them to collectively negotiate and manage the sharing of environmental resources without considerable facilitation

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and trust-building. Moreover, there is strong distrust in government regulation as well as advice that comes from outsiders, including non-governmental organizations. SEQ Catchments is in the process of addressing these barriers. Facilitation would therefore be needed to build the level of cooperation required to address water quality.

3.

Management opportunities

The case study has illustrated how water quality has CPR characteristics, with shared interests and thus management implications extending over a large geographical area from the Lockyer catchment to Moreton Bay. Further, these water quality issues are sufficiently severe to require major action. Some multi-stakeholder collaborative institutional arrangements already exist, with responsibilities for generic natural resource management and water quality management respectively. However their roles are not yet sufficient to incorporate CPR management approaches to solve the upstream-downstream water quality problems. Meanwhile MBIs are not currently applied to the water quality remediation challenges, though NMBIs exist to some extent. There is current policy interest in providing incentives to aid landholders to increase riparian vegetation or to change land management practices, and some small-scale pilot projects. We argue that a combination of CPR management logic, nurturing cooperation, with NMBIs used to promote cooperation and willingness to act then MBIs making action financially viable, present an opportunity to solve the water quality problems. Riparian vegetation — the measure most strongly recommended by biophysical scientists to achieve significant change — would have greatest effect if whole reaches of river were rehabilitated, beginning with those where erosion is worst owing to the soils and past land practices. This would require sequences of landholders along reaches of rivers to agree to set aside land and plant riparian vegetation, preferably to consistent widths, implying a degree of cooperation among themselves and with any organizations encouraging them in this step. Substantial financing would be required. The logical source of this is the beneficiaries of improved water quality (beyond a duty of care to the environment expected of landholders). There is a potential market involving Brisbane's water supply authority which might find it cheaper to subsidize catchment restoration (natural capital offering ecosystem services) than to invest in physical capital, the building of a new water treatment plant to take a higher proportion of sediments and nutrients out of the water than is currently possible (Rajbhandari, 2003). Another potential “buyer” of improved water quality is the City of Brisbane, representing its residents and businesses. Recognizing that landholders could be sellers of ecosystem services beyond a negotiated expectation level of “duty of care” with respect to their property management, and that downstream interests could be buyers of the services, would provide a strong rationale for cooperation at the whole-ofcatchment (Lockyer to Moreton Bay) scale. The creation of a MBI to pay for catchment restoration could thus become the principal strategy promoting cooperation among sellers (to get

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themselves organized and design a regime that is fair and works well locally), and between sellers and buyers. If landholders and beneficiaries were able to cooperate at their different scales, they could devise institutional arrangements to deliver improved water quality outcomes. Cooperation among landholders (riparian landholders for stream-bank revegetation, all landholders for change in cultivation and grazing practices) is necessary to perform at least three tasks. The first is to maintain a level of good land management practice in conformity with a deemed level of duty of care to the environment. (No duty of care is currently specified, either legally or in public opinion). The second is to negotiate jointly with potential beneficiaries to set up a level of contribution based on the price of the land that individual landholders are about to set aside for riparian vegetation; the opportunity costs of reduced cropping or grazing area; the costs of fencing, planting and maintaining the vegetation; and any costs involved in changing land management practices. The third task is to encourage individual landholders to participate in the revegetation program (or programs of change in land management practices). Cooperation among the beneficiaries is imperative to carry out at least two tasks. The first is to reach an agreement to jointly provide some compensation for the opportunity costs and direct costs met by landholders in enhancing the ecosystem services to improve water quality. The second is to strengthen cooperation among the landholders so that they can work in partnership with the beneficiaries. The combination of CPR logic with MBI arrangements to improve ecosystem services is vital. If payment for revegetation is not linked to cooperation at different levels of stakeholders — among the landholders, and between landholders and beneficiaries, as well as among beneficiaries — it is likely to prove ineffective for several reasons. Firstly, the landholders do not generally trust government or outsiders, including non-government organizations, even if their policies look appealing or have potential to correct a problem. Secondly, setting aside land for riparian vegetation carries major opportunity costs in high value cropping land, where every meter of riverbank replanted would lessen the land available for crops. Some small properties in steep-sided valleys would lose a significant proportion of their most productive land (Pers. Comm. to second author). Furthermore, unlike societies with strong customary arrangements for shared resource use, landholders in Australia lack long-standing, socially established norms to manage shared resources collectively. This is despite considerable success in integrated catchment management. Since landholders have private property rights to their land, and a strong psychology of private ownership rights, many are not yet particularly inclined to recognize the common-pool dimensions of resource problems arising at the catchment level. We envisage the MBI system working through a managed fund, in which one or more purchasers of improved ecosystem services for water quality contribute dollars and negotiate performance expectations and indicators. The amount of investment should ideally be underpinned by calculations of the costs and benefits of restoration: what does it cost a landholder in opportunity costs for production foregone, and direct costs in purchase, planting and maintenance of trees and fences, to install riparian vegetation? What is then the cost for restoration of entire reaches of streams? The costs

could be shared between several parties; each deriving benefits from the same restoration actions. For instance, a modest levy on water rates in Brisbane could create a large fund, given the population, which represents both the interests of citizens in a cleaner river, and the cost-effectiveness of avoiding or delaying upgrading of the water treatment plant to higher performance capability. The port of Brisbane could also contribute, to the extent that it stands to gain from reduction in long-term future dredging costs. The fund would need to be long-term, since catchment restoration works would take time, and environmental outcomes would take even longer. The sediment generated up-catchment today can take years to move down the system, depending on the weight of the particles. A “broker” for the fund, for instance SEQ Catchments, is almost certainly needed. Landholders, with facilitation especially in the initial years, would meanwhile organize themselves to co-operate over restoring priority reaches of the Lockyer, probably on a reach-by-reach basis coordinated through a Lockyer-wide organization. Funds from the MBI would need to be distributed to landholders, according to agreed rules and performance indicators, to accomplish and maintain the necessary restoration works. This raises an interesting philosophical position for landholders: they might usefully construe themselves as multi-tasking, providing ecosystem services as well as farming for profit or holding a property for lifestyle purposes. Cooperation also usually leads to the build-up of social capital, which is composed of shared knowledge and institutional arrangements that a particular group of individuals contribute to their activities (Coleman, 1988). Government and catchment bodies have usually pointed to improvement of riparian vegetation as a solution to water quality problems, since this stabilizes stream banks and traps sediments and nutrients. However, they have rarely realized that the riparian vegetation approach should be made in a way that the landholders can accept, and for which formulation of social capital is important. The few institutional arrangements in the Lockyer catchment that landholders have so far engaged in: Landcare, Waterwatch and formerly Integrated Catchment Management ICM (now subsumed under SEQ Catchments) and the Lockyer Water Users Forum, and the available incentives from governments and catchment bodies, have been insufficient to motivate a critical mass of landholders to pursue water quality solutions in a cooperative way. While existing groups offer nuclei, these groups need to be encouraged and assisted to work together for water quality. Strong cooperation and institutional arrangements, especially involving the riparian landholders and beneficiaries, are crucial to accommodate government regulations and provide economic incentives to execute the setting aside of farming land for riparian buffer strips. Government is in no position to force the landholders to forgo their private land for this purpose, but can promote cooperation and the provision of incentives. Williamson et al. (2003) argue that in Australia, landholder groups have historically been unable to formulate strong institutional arrangements and that this has resulted in the failure of the objectives of the groups' programs. Although these groups have taken some collective initiatives in various parts of Australia to vegetate individual farmland as a means to address externality issues such as salinity and water

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allocation between upstream and downstream water users, decisions based on individual self-interest have generally prevailed over collective decision-making processes. As indicated earlier, one of the requirements for a solution to work will be to strengthen the organization and membership of local groups before a payment system for ecosystem services, including a fair local distribution mechanism, is implemented. This will build strong social capital at multiple levels. Existing studies on ecosystem services (Salzman, 2005; Rajbhandari, 2003; Heal, 2000; Costanza et al., 1997; Daily, 1997) to improve water quality have primarily been concerned with the development of natural/green capital (e.g. investment in riparian vegetation to improve water quality) versus physical/built-in capital (increased costs of investment in water treatment). The agenda for the development of natural capital usually involves MBIs and NMBIs to cope with externality problems. The idea of addressing water quality through a CPR approach to promote the cooperative element that is also required will contribute a new dimension to the existing policy agenda. We do not present this as the only way to address water quality issues. As Brock and Carpenter (2007) argue, a combined approach comprising several policy interventions such as government regulation and community-based management could encompass the benefits of all the approaches involved to address the issues of natural resource management including the issue of negative externalities due to DSP. While a particular policy cannot be a “panacea” to solve the natural resource management problems, analyzing the impact of a certain combination is crucial to avoid its harmful consequences (Ostrom, 2007).

4.

Conclusion

Water quality deserves greater recognition within the CPR literature, and the recognition of CPR characteristics of water quality can also enhance the interdisciplinary literature on water management. We have demonstrated through argument and our case study the ways in which water quality, like water itself, possesses CPR characteristics. Like other attributes of water (its availability), the shared “use" of water quality involves high subtractibility and low excludability, posing a danger of overexploitation and destruction of the resource. Water quality is also subject to appropriation and provision problems: some users can appropriate water quality by polluting it, to the disadvantage of others, and there are difficulties in ensuring users' contributions of maintenance services to help preserve the water quality. We argue that CPR logic could thus be placed on the existing management agenda to manage rural diffuse sources of water quality much more effectively. In our proposed scenario, cooperation among landholders (as generators of diffuse water pollution, and as those capable of improving it at source), then between landholders and the beneficiaries of improved water quality, provides an overarching framework for concerted action that incorporates existing strategies. Typically, water quality problems are addressed by two categories of policy instruments. These are MBIs, which in our problem domain would require incentive payments (e.g., payment for maintaining and improving ecosystem services) to landholders so that they construct riparian buffer strips to

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produce ecosystem services that raise water quality; and NMBIs, which are government regulations or persuasive strategies that would require or stimulate landholders to pursue better land management practices that result in reduced soil erosion and nutrient flows. However, these are not as clear-cut to introduce as with PSP, since it is more difficult to pinpoint sources of DSP and far more complex to structure the economics of an MBI between buyers and sellers. We suggest that appreciation of the CPR characteristics of water quality would add to the persuasive element of NMBIs and foster cooperation among landholders and the beneficiaries of improved water quality, in order to solve the problems more comprehensively. Cooperation among landholders is vital to ensure that viable areas (for instance whole reaches of rivers) participate in the management scheme, and that participation takes place, equitably, according to rules mutually agreed among the landholders. (The alternative, individual agreements between say government and individual landholders, is unlikely to achieve participation or outcomes on the scales required.) MBIs then offer a source of finance to create remedial action achievable on fair terms — costed according to the ecosystem services provided. Payment by beneficiaries to the landholders in the Lockyer catchment would constitute an MBI approach (Williams, 2004; Rajbhandari, 2003). The beneficiaries would buy ecosystem services from the landholders, with the landholders acting as sellers. The beneficiaries include Brisbane City Council on behalf of its residents, water supply authority, and the Port of Brisbane Corporation who are concerned about water quality in the Brisbane River and marine areas. Without cooperation at several levels, the ecosystem market is not likely to form. The right blend of NMBIs and MBIs, used within the CPR logic, could surmount current lack of opportunity for effective cooperation, facilitate a market for ecosystem services, and enable enhancement of water quality in the Lockyer catchment, the Brisbane River and Moreton Bay.

Acknowledgements The authors acknowledge past and present members of their ecosystem services research team at the University of Queensland (Richard Brown, Ken Keith, Brad Jorgensen, and their students Ian Beitz, Beryl Rajbandhari and Anna Williams), the Lockyer Catchment Centre (Andrew Davidson, former coordinator, and Debbie Beitz, former volunteer/coordinator), SEQ Water (Mark O'Donohue), Moreton Bay Waterways and Catchments Partnership (Joan Meecham, David Allworth), and SEQ Catchments (David James, Andrew Davidson, Tony McKew) for contributing to our understanding of the environmental issues and management opportunities. We are indebted to two anonymous reviewers for their comments and suggestions that have substantially improved the paper.

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